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Post by Darcy Collins on Feb 19, 2016 18:43:41 GMT
An LLC never pays tax as it's a pass through entity. The LLC income is added to your personal income and you pay taxes through your personal income taxes. Not in Kansas - so are you saying they no longer have to claim K1 income on their state taxes? Darcy, This is an article I found that explains the new law. I am not a business owner so I wasn't sure of the specifics!!
"New" Kansas Law: No State Income Tax to Pass-Through Entities
Ok, so maybe it’s not that new anymore (the law was signed on May 22, 2012, and effective as of January 1, 2013), but we think some of the effects are just now starting to be realized. The law eliminates Kansas individual income tax on business income earned in pass-through entities. This includes sole proprietorships, partnerships, LLC’s taxed as partnerships, and S-corps. So what are we seeing as recent effects of this law, and how can this benefit our clients?
For starters, we should first understand the change and why it’s relevant. Pass-through entities (see above) are generally not taxed at the entity/corporate level, as the non-wage income from the entity instead “passes through” to the individual tax return of the business owner. Because of that, the tax is reported and taxed under the individuals’ income tax return of the owner. The new law means that this Kansas income for these entities is no longer taxed, not even by the individual business owner.
That's ummmm interesting. I'm going to put this in the category of "what the hell were they thinking" - with a healthy dose of "yet another example of politicians meeting unintended consequences." It's such an obvious gimmick. I'm often on the side of reducing tax rates - particularly on businesses as it can be beneficial in spurring economic activity. But I'm also firmly on the side of SIMPLIFYING the tax code and stop trying to artificially create winners and losers. I have no doubt the politicians were telling themselves how this was going to benefit small business owners - with no clue how long it would take others to take advantage of it. Stupid. ETA - I was curious what some of the conservative tax people thought about this - they hate it too. Wow when the "we hate all taxes" Tax Foundation think your idea is misguided - you're in some deep smelly stuff. Sorry to depress you further, but thought it interesting that both the right and the left think this is a craptastic idea: www.kansascity.com/news/local/article317708/Analysts-from-left-and-right-call-Kansas-tax-plan-the-worst-in-U.S..htmltaxfoundation.org/article/not-kansas-anymore-income-taxes-pass-through-businesses-eliminated
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Judy26
Pearl Clutcher
MOTFY Bitchy Nursemaid
Posts: 2,834
Location: NW PA
Jun 25, 2014 23:50:38 GMT
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Post by Judy26 on Feb 19, 2016 18:54:57 GMT
PA has set a new record for going the longest without a state budget. The governor is fighting with the House who are fighting with the Senate who are fighting with the Republicans who are fighting with the Democrats. Work is starting on next year's budget while nothing is being funded for this year. If I did my job this way I would be fired. And if my students fought and harassed each other the way these politicians do I would call their parents and put them in Time Out. It's disgusting. How long has it been? Because we (IL) have also been without a budget since July 1st with nothing in sight, and our governor wad just yesterday talking about the next budget. Despite cutting a lot of services due to lack of budget, we have managed to spend more money than the budgets he vetoed. Very frustrating. IL at least passed a stop-gap budget. PA released some funds to keep schools open temporarily but that will come to a screeching halt about mid March. And unless a miracle happens it looks like next year will be no better. We are looking seriously at moving out of state after I retire. This is getting old.
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Post by kellybelly77 on Feb 19, 2016 19:16:59 GMT
Darcy, This is an article I found that explains the new law. I am not a business owner so I wasn't sure of the specifics!!
"New" Kansas Law: No State Income Tax to Pass-Through Entities
Ok, so maybe it’s not that new anymore (the law was signed on May 22, 2012, and effective as of January 1, 2013), but we think some of the effects are just now starting to be realized. The law eliminates Kansas individual income tax on business income earned in pass-through entities. This includes sole proprietorships, partnerships, LLC’s taxed as partnerships, and S-corps. So what are we seeing as recent effects of this law, and how can this benefit our clients?
For starters, we should first understand the change and why it’s relevant. Pass-through entities (see above) are generally not taxed at the entity/corporate level, as the non-wage income from the entity instead “passes through” to the individual tax return of the business owner. Because of that, the tax is reported and taxed under the individuals’ income tax return of the owner. The new law means that this Kansas income for these entities is no longer taxed, not even by the individual business owner.
That's ummmm interesting. I'm going to put this in the category of "what the hell were they thinking" - with a healthy dose of "yet another example of politicians meeting unintended consequences." It's such an obvious gimmick. I'm often on the side of reducing tax rates - particularly on businesses as it can be beneficial in spurring economic activity. But I'm also firmly on the side of SIMPLIFYING the tax code and stop trying to artificially create winners and losers. I have no doubt the politicians were telling themselves how this was going to benefit small business owners - with no clue how long it would take others to take advantage of it. Stupid. ETA - I was curious what some of the conservative tax people thought about this - they hate it too. Wow when the "we hate all taxes" Tax Foundation think your idea is misguided - you're in some deep smelly stuff. Sorry to depress you further, but thought it interesting that both the right and the left think this is a craptastic idea: www.kansascity.com/news/local/article317708/Analysts-from-left-and-right-call-Kansas-tax-plan-the-worst-in-U.S..htmltaxfoundation.org/article/not-kansas-anymore-income-taxes-pass-through-businesses-eliminatedin the beginning they estimated a small numbers of businesses would be affected but what happened was tons of businesses re-classified (or whatever the appropriate term is) to the correct type of entity to take advantage of it. We now have an estimated 330,000 business owners who are not paying taxes. And yet, our craptastic gov touts this as good. because he sees all the reclassified businesses as economic growth. "Lookie here at all these new businesses opening under our tax plan". Not even close!!!
With this tax cut we simply aren't bringing in enough money to fund the most basic services of our state. And he has said he will veto any budget that is passed that brings this tax back. Both sides of the aisle are struggling but our Governor has dug in his heels.
Thanks for the articles I am off to read them!!
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